GAPP Principle 19

The SWF’s investment decisions should aim to maximise risk-adjusted financial returns in a manner consistent with its investment policy, and based on economic and financial grounds.

• GAPP 19.1 Subprinciple If investment decisions are subject to other than economic and financial considerations, these should be clearly set out in the investment policy and be publicly disclosed.
• GAPP 19.2 Subprinciple The management of an SWF’s assets should be consistent with what is generally accepted as sound asset management principles.

Status: Implemented

The stated objective of the asset management in the management mandate is to maximise long-term return net of costs measured in international currency, subject to specified risk limits. Within the scope of this objective, the Fund shall be responsibly managed.

Responsible investment activities form an integral part of the management of

the investment portfolio. See response to principle 18 for further details.

The Ministry of Finance has issued Guidelines for Observation and Exclusion of companies from the Government Pension Fund Global based on ethically motivated criteria. The guidelines stipulate the process for observation and exclusion of individual companies from the GPFG investment universe. Norges Bank receives recommendations on exclusion, observation or re-inclusion of companies from an independent Council on Ethics established by the Ministry. The final decision rests with the Executive Board of Norges Bank. The guidelines are publicly available, and both the recommendations from the Council on Ethics and the decisions of the Executive Board of Norges Bank are made public.

The management mandate issued to Norges Bank requires a broad set of principles for responsible management of the GPFG investment portfolio to be established. In formulating the principles for responsible management, the mandate states that the Bank shall put emphasis on the long time horizon for the management of the investment portfolio, as well as its basis in broad diversification of investments. The principles shall be based on environmental, social and corporate governance considerations in accordance with internationally recognised principles and standards, such as the UN Global Compact, the OECD Guidelines on Corporate Governance, and the OECD Guidelines for Multinational Enterprises.

According to the mandate Norges Bank shall make investment decisions and exercise ownership rights independently of the Ministry. The Bank publishes a set of ownership principles and expectations documents on specific topics to ensure transparency and predictability in the exercise of ownership rights associated with Fund investments. The overall objective for the exercise of ownership rights is to safeguard the financial interests of the GPFG in the long term.

The Ministry of Finance has further specified a government bond exclusion clause in the management mandate, stating that the GPFG shall not be invested in fixed-income instruments issued by governments or government-linked entities in the exceptional cases where the Ministry has barred such investments based on particularly large-scale UN sanctions or other international initiatives of a particularly large scale that are aimed at a specific country and where Norway supports the initiatives.

Sources: Guidelines for Observation and Exclusion, GPFG mandate, Norges Bank’s website.